Professional · Denver, CO · Member since 2014 · 15 posts · 3 votes
In the state of Colorado - if I were to buy a foreclosure HOA lien for $9,500.00 and the property value is $165,000.00...
What would happen to the first and second mortgages?
Real Estate Agent · Erie, CO · Member since 2014 · 1k+ posts · 512 votes
10y
As Bill stated the second can pay you off and retain their interest. When you purchase an HOA lien of that value it's almost definitely over 6 months late. Following Linda's note, 6 months (plus attorney fees, and some other items) becomes the first position behind tax liens. The remainder goes into last position for the day it is filed. So if there is a first and second mortgage on the home at the time the HOA lien was filed then you would hold 1st and 4th position. If there is just a first mortgage then you're 1st and 3rd position. You can attempt to use these positions to negotiate with the lender to pay the lien off and take possession. This of course is all situational and you should really evaluate each one individually. Lots of times it's unlikely the bank will play along and will just pay you off. If you want the best situation then you purchase HOA liens where there is no mortgage. Then of course you have to be the one foreclosing. I for one am not really a fan of that method, but to each their own.
None of this is legal advise. These are just points I have slowly been discovering while digging into this same topic. If you have a situation that you're really curious about then call your attorney to run it past them.
Investor and CPA · Arvada, CO · Member since 2015 · 2k+ posts · 3k+ votes
10y
I'm going to tag both @Bill S. and @Dan Mackin as they are both pretty knowledgeable and can answer this question in more depth.
The simple answer is that the 6 months worth of dues is in first place before the 1st and 2nd mortgages (but behind any property tax and IRS liens, I think). You can also add in legal fees and other reimbursables to that as well, I believe.
Then the rest of the balance comes after the 1st and 2nd mortgages.
So let's say the monthly HOA is $300 and your $9500 balance consists of $3500.00 of attorneys fees, so that it's 20 months of HOA dues.
If either the first or second mortgage holder forecloses, you'll receive $300 x 6 = $1800 + $3500 = $5300. The balance may then get wiped out, although I understand there are some cases in which you will receive the full amount.
If you foreclose, then you'll get the full $9500 plus whatever costs you have to foreclose.
(Assuming there's enough equity after paying off the first and second mortgage holders).
Essentially, you have 2 liens. A 6 month lien that comes in before the mortgages and then the balance that comes in after.
Rental Property Investor · Denver, CO · Member since 2013 · 4k+ posts · 2k+ votes
10y
@Allan Tamez Generally the first remains in place and the second is wiped out. The second can pay you off (redeem your foreclosure) and protect their interest. Here is an explanation I found via Google. Now I am not an attorney and don't even consider myself knowledgible. Get legal advise before wading into these waters.
Real Estate Agent · Erie, CO · Member since 2014 · 1k+ posts · 512 votes
10y
As Bill stated the second can pay you off and retain their interest. When you purchase an HOA lien of that value it's almost definitely over 6 months late. Following Linda's note, 6 months (plus attorney fees, and some other items) becomes the first position behind tax liens. The remainder goes into last position for the day it is filed. So if there is a first and second mortgage on the home at the time the HOA lien was filed then you would hold 1st and 4th position. If there is just a first mortgage then you're 1st and 3rd position. You can attempt to use these positions to negotiate with the lender to pay the lien off and take possession. This of course is all situational and you should really evaluate each one individually. Lots of times it's unlikely the bank will play along and will just pay you off. If you want the best situation then you purchase HOA liens where there is no mortgage. Then of course you have to be the one foreclosing. I for one am not really a fan of that method, but to each their own.
None of this is legal advise. These are just points I have slowly been discovering while digging into this same topic. If you have a situation that you're really curious about then call your attorney to run it past them.